Sun Share Ltd. produces a variety of furniture products. The operations manager

Question

Sun Share Ltd. produces a variety of furniture products. The operations manager wants to prepare an aggregate plan for the next five months. Demand forecast as given below.

Cost of production per hour using regular time is $4.00, and using overtime it is $7.50. Cost of production per unit using subcontracting is $20.00. Inventory holding cost per unit per period is $1.50. Backorder cost per unit per period is $5.00. Hiring cost is $200.00 per worker. Firing cost is $250.00 per worker. Currently there are 40 workers and each can produce 0.2 units per hour. Beginning inventory is 400 units.

When computing number of workers needed, make sure you ONLY round the number up to a whole number if the number after the decimal point is equal to five or above.

(a) Develop an aggregate plan using a “chase strategy” and determine the cost.

(b) Develop an aggregate plan using a “level strategy” and determine the cost.

Jan Feb March April May June Total Demand Forecast 1,800 1,500 1,100 900 1,100 1,600 8,000 Working Days 22 19 21 21 22 20 125

Explanation / Answer

A.

B.

Rate Jan Feb March April May June Total Net requirement Demand Forecast 1,800 1,500 1,100 900 1,100 1,600 8,000 Working Days 22 19 21 21 22 20 125 0.2 Workers 40 40 33 27 32 50 Net demand/(days*8*.2) Opening inv 400 8 0 0 7 34 Production Regular 1408 1216 1109 907 1126 1600 Production OT 0 276 0 0 0 0 Subcontract 0 0 0 0 0 0 Closing inv 8 0 0 7 34 34 Hiring 0 0 0 0 5 18 Firing 0 0 7 6 0 0 Back order 0 0 0 0 0 0 4 Production cost 28,160 24,320 22,176 18,144 22,528 32,000 7.5 OT cost 0 2,070 0 0 0 0 20 Subcontract cost 0 0 0 0 0 0 1.5 Inv cost 12 0 0 11 50 50 5 Back order 0 0 0 0 0 0 200 Hiring cost 0 0 0 0 1000 3600 250 Firing cost 0 0 1750 1500 0 0 Total cost 28,172 26,390 23,926 19,655 23,578 35,650 Grand Total        1,57,372

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